1. What is Lapse Rate?

The lapse rate measures the percentage of withdrawals relative to the total balance in retirement accounts. It helps assess the sustainability of retirement withdrawals and the potential depletion rate of funds.

2. How Does the Calculator Work?

The calculator uses the lapse rate formula:

Where:

• \( Withdrawals \) — Total withdrawals from retirement account (USD)
• \( Balance \) — Current retirement account balance (USD)

Explanation: The equation calculates what percentage of the current balance is being withdrawn, which helps in retirement planning and sustainability analysis.

3. Importance of Lapse Rate Calculation

Details: Monitoring lapse rates helps retirees understand if their withdrawal patterns are sustainable long-term and whether adjustments are needed to preserve retirement funds.

4. Using the Calculator

Tips: Enter total withdrawals and current balance in USD. Both values must be positive numbers, with balance greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a sustainable lapse rate in retirement?
A: Generally, a lapse rate below 4-5% is considered sustainable for long-term retirement, though this depends on investment returns and inflation.

Q2: How often should I calculate my lapse rate?
A: It's recommended to calculate annually or whenever there are significant changes to withdrawals or account balance.

Q3: Does this account for investment growth?
A: No, this is a simple withdrawal rate calculation. For comprehensive planning, consider expected returns and inflation.

Q4: What if my balance changes frequently?
A: Use average balance over a period for more accurate calculations, or calculate lapse rate at consistent intervals.

Q5: Should I include all retirement accounts?
A: Yes, for complete picture include all retirement accounts (401k, IRA, etc.) in your balance and withdrawals.